Timbercorp Finance Pty Ltd (In Liq) v Allan (Costs)
[2016] VSC 633
•26 October 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S ECI 2015 000121
| TIMBERCORP FINANCE PTY LTD (IN LIQUIDATION) (ACN 054 581 190) | Plaintiff |
| v | |
| GRANT ROBERT ALLAN | Defendant |
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JUDGE: | DERHAM AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | By submissions filed 29 September 2016 |
DATE OF JUDGMENT: | 26 October 2016 |
CASE MAY BE CITED AS: | Timbercorp Finance Pty Ltd (In Liq) v Allan (Costs) |
MEDIUM NEUTRAL CITATION: | [2016] VSC 633 First Revision 2 November 2016 |
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COSTS – Application by defendant to set aside service of a writ where writ served without notice required by the Service and Execution of Process Act 1992 (Cth) – Application by the plaintiff to extend the validity of the writ in the event that service set aside – Service of the writ set aside and validity of the writ for service extended – Appropriate order for costs having regard to the defendant’s deliberate strategy to rely upon the technical deficiency in service and the plaintiff’s failure to include the SEPA notice with the service – No order as to costs of either application.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J P Moore QC with Mr C R Brown | Mills Oakley Lawyers |
| For the Defendant | Mr D H Denton QC with Ms P Djohan | HopgoodGanin |
HIS HONOUR:
Introduction
On 26 August 2016, I published reasons for decision in two applications, one by the plaintiff to set aside service of the originating process (‘writ’) in this proceeding (and other relief) and another by the defendant to extend the validity of the writ for service.[1]
[1]Timbercorp Finance Pty Ltd (In Liq) v Allan [2016] VSC 481.
I concluded that the service of the writ was not effective because of non-compliance with the Service and Execution of Process Act 1992 (Cth) (‘SEPA’) but that in the circumstances described in my reasons for judgment the proceeding should not be permanently stayed because it was appropriate to extend the validity of the writ for service under r 5.12 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’).
The parties are in dispute as to the appropriate order for costs. These reasons explain the basis upon which I have concluded that each party shall bear its own costs of both applications.
Background
The two applications to which I have referred were:
(a) an application by the defendant by summons filed 21 April 2016 for orders that the writ served on him be set aside as ineffective pursuant to s 16 of the SEPA and that the writ be permanently stayed; and
(b) an application by the plaintiff by summons filed 29 April 2016 for the period of validity of the writ for service to be extended pursuant to rules 5.12(2) and 5.12(3) of the Rules.
I found that the non-compliance by the plaintiff with s 16 of the SEPA (by failing to include the prescribed notice) meant that there had been no effective service of the writ and by order made on 5 September 2016 that service of the writ was set aside. I also found that it was appropriate to extend the validity of the writ for service.
The parties have made written submissions in accordance with orders made by me on 5 September 2016.[2] In addition the defendant has filed the affidavit of its solicitor sworn 29 September 2016. That affidavit, rather perplexingly, refers to and exhibits orders made by the Court, correspondence by email between the parties and between my associate and the parties and the affidavits of Paul Wilson (the affidavit of service) and Stuart Lewin (the late filed affidavit relied upon by the plaintiff). With the exception of some of the emails between the parties none of these documents needed to be put into evidence.
[2]Each submission is dated 29 September 2016.
Submissions
Plaintiff
The plaintiff submits the appropriate order is that the defendant pay the plaintiff’s costs of and incidental to both applications on a standard basis. Alternatively, that those costs should be costs in the proceeding.
There are a number of factors advanced by the plaintiff in support of its proposed costs orders, as follows:
(a) the plaintiff was effectively the successful party because its aim was to be able to continue with the proceeding and that was achieved. By contrast, the defendant’s aim was to permanently stay the proceeding or bring it to an end and in this he failed;
(b) the basis of the plaintiff’s application for an extension of the validity of the writ was very strong. The factors that justify this submission are:
(i) the defect in service (the absence of a SEPA notice) was a technical deficiency;
(ii) the defendant had in fact been provided with the writ within the time allowed by the Rules;
(iii) the plaintiff had taken reasonable steps to serve the writ;
(iv) there would be prejudice to the creditors of the plaintiff if the time were not extended because the defendant would avoid liability by the expiry of the limitation period;
(v) there was no identifiable prejudice to the defendant apart from presumptive prejudice;
(vi) the delay in the service of the writ was justified by waiting for the resolution of the group proceeding, the vast number of claims the plaintiff had on foot against borrowers and the desirability of obtaining the original documents relating to the loans to the defendant before serving the writ with a statement of claim;
(vii) the defendant adopted a deliberate strategy of not responding to the service of the writ (albeit without the SEPA notice) and not entering an appearance until the last possible time, with knowledge of the pending expiry of the validity of the writ;
(c) before issuing its summons seeking to extend the validity of the writ, the plaintiff wrote to the defendant on a ‘without prejudice save as to costs’ basis, offering an amicable resolution involving a consent to the setting aside of the service of the writ if the defendant consented to the extension of the validity of the writ for service, with no order as to costs.[3] This is precisely the outcome arrived at after full argument;
(d) the position adopted by the defendant caused costs to be incurred. The defendant ought reasonably to have filed a conditional appearance as soon as it became aware of the defect in service which would have been well before the expiry of the writ; and
(e) separate and differential costs orders on each summons would not be appropriate because ultimately there was only one issue before the Court, that is whether the proceeding should be permanently stayed or continue with time allowed for service in accordance with the SEPA.
[3]Letter dated 26 April 2016 from Mills Oakley to HopgoodGanim, attached to the plaintiff’s written submissions on costs dated 29 September 2016.
Ordinarily a party seeking an indulgence is ordered to pay the costs of the application for the indulgence. The plaintiff nevertheless submitted that, consistently with the judicial exercise of the costs discretion, the general rule is not invariable or inflexible and in this case should not apply, because:
(a) the plaintiff’s summons seeking further time to serve the originating process was filed in response to the defendant’s summons. The defendant could have consented to the jurisdiction of the Court at any time by filing an unconditional appearance despite the defect in service of the writ;
(b) that was the reasonable course to adopt, given that an application to extend time for service was highly likely to be granted; and
(c) it is in any event to be doubted whether the plaintiff’s application in the circumstances of this case should be characterised as seeking an indulgence so as to engage the general rule. The writ had in fact been provided to the defendant, via the agreed method of service, within the time required by the rules. It was only the omission of the SEPA notice that caused service to be ineffective. That omission caused no real prejudice to the defendant. The defendant sought to exploit that technical deficiency so as to achieve a windfall gain. The plaintiff’s application was necessary to defeat that attempt.
As Wheeler JA said in Stanley v Layne Christensen Company [2006] WASCA 56 at [52]:
However, it is also a normal rule that the Court will have regard to the extent to which it might be said that costs were unnecessarily incurred by a party, and will have regard to the reasonableness of the party’s conduct in determining how costs should be awarded. In particular, where a contested application, even for an indulgence, is unnecessary because a party acting reasonably would have consented to appropriate orders, the party who has caused the costs to be unnecessarily incurred will not obtain its costs of such a proceeding merely because the application is for some indulgence.
Defendant
The defendant submits that the plaintiff should pay the defendant’s costs of and incidental to the defendant’s application on a standard basis and the costs of the plaintiff’s application on an indemnity basis, with both sets of costs to be given priority in the winding up and to be taxed immediately pursuant to r 63.20.1 of the Rules. Alternatively, the defendant submits the plaintiff pay the defendant’s costs of both applications on a standard basis, with priority and an immediate taxation order.
The factors in favour of the orders that the defendant seeks are as follows:
(a) he was successful on his application to set aside the service of the writ and the costs of that application should follow the event and be taxed on a standard basis;
(b) the arguments advanced by the plaintiff in answer to the defendant’s application were pursued at some length in both written and oral submissions. They were, however, contrary to the plain reading of s 16 with the SEPA and the weight of authority;
(c) the plaintiff is not entitled to the costs of its application because it is its own conduct, or the conduct of its solicitor, that brought about the need to extend the validity of the writ. Further, the defendant was a necessary and proper contradictor to the plaintiff’s application and should not be left out of pocket by reason of the costs incurred in opposing the application;
(d) the defendant is guilty of disobedience of the order made by Judd J on 29 April 2016 in failing to file the affidavits of the process server, Paul Wilson[4] until 27 July 2016 and Stuart Andrew Lewin[5] until 1 August 2016, almost three months after the date ordered by Judd J. The defendant complains that the Wilson affidavit was never served, although the solicitor for the defendant noted that it had been filed by undertaking a search on RedCrest on the day it was filed. Those affidavits contained direct evidence of facts that I subsequently relied upon for granting the extension of time;
[4]Sworn 19 February 2016.
[5]Sworn 1 August 2016.
(e) the evidence of the oversight by the solicitor for the plaintiff in failing to include the SEPA notice with the service of the writ on 25 February 2016 was only advanced in the affidavit of Mr Lewin. Before that affidavit was filed there was no direct evidence of mistake. That evidence should have been deposed to in the affidavit of Mr Grant filed on 6 May 2016;
(f) the plaintiff improperly and wrongly pursued its allegation of ‘sharp practice’ against the defendant’s solicitor in its written submissions and at the hearing. It only withdrew the allegation when it was challenged in the course of the hearing;
(g) the delay in the filing and service of Mr Lewin’s affidavit is unexplained. Reliance on the affidavit of Mr Wilson was not indicated until the plaintiff’s outline of submissions was served;
(h) the plaintiff’s disobedience of the orders of the Court is a civil contempt.[6] That contempt should be classed as wilful and not accidental or unintentional because –
[6]Witham v Holloway (1995) 183 CLR 525, 530.
(viii) Mr Wilson’s affidavit was sworn on 19 February 2016 yet not filed with the affidavits of Mr Grant sworn 7 April and 29 April 2016;
(ix) none of the evidence in the affidavit of Mr Lewin was unknown to the plaintiff at the time it was required to file its evidence (on 6 May 2016) and there is no reason why the affidavit of Mr Lewin could not have been filed by the time required by the orders of Judd J;
(i) the defendant was entitled to know as at 6 May 2016 the nature of the evidence the plaintiff intended to rely upon in support of its application. The defendant contends that if he had been aware of that evidence he would have had an opportunity to take advice and consider whether he should consent to the orders sought in the plaintiff’s application. He was denied that opportunity by the failure of the plaintiff to file its evidence in accordance with the orders of Judd J. This caused the defendant to incur very considerable costs in the preparation of its outline of submissions. In short, the plaintiff invited the defendant to contest the plaintiff’s application;
(j) non-compliance with an order of the Court necessarily constitutes an interference with the administration of justice;[7]
[7]Environment Protection Authority v Pannowitz(No 2) (2006) 153 LGERA 126, [22], citing Witham v Holloway (supra), 533-534.
(k) there is only one reason open to be inferred that explains the late filing of the affidavits of Mr Wilson and Mr Lewin, and that is the plaintiff deliberately and thus wilfully ignoring the orders made by Judd J so as first to ascertain from the defendant’s outline of submissions the substance of his arguments as to why the period for service should not be extended and thus to obtain a forensic advantage;
(l) the plaintiff delayed in the filing of its critical affidavits for 83 days and until after receiving the defendant’s written outline of submissions (on 27 July 2016) before informing the defendant that it intended to rely on the affidavit of Mr Wilson. Notice of its intention to rely upon Mr Wilson’s affidavit was contained in a footnote to the plaintiff’s written submissions;
(m) the delay in the filing and service of Mr Lewin’s affidavit can only be explained as an attempt to derive some form of forensic advantage; and
(n) if the plaintiff is not ordered to pay the defendant’s costs the result will be that the Court will be sanctioning a deliberate breach of the Court’s orders as to the filing and service of its evidence, and that would be an anathema to the proper administration of justice because it would have the effect of rewarding the plaintiff for its contempt of Court whilst denying the defendant a proper indemnity for the costs he has incurred as a result of the plaintiff’s conduct.
Consideration
Under s 24 of the Supreme Court Act 1986 the power to award costs is in the discretion of the Court. Whilst the discretion is absolute and unfettered, it has to be exercised judicially, that is, not by reference to irrelevant or extraneous considerations, but upon facts connected with or leading up to the litigation.[8]In the exercise of the discretion, practices or guidelines have developed.[9] These practices are not legal rules that confine the exercise of the discretion.[10]
[8]Latoudis v Casey (1990) 170 CLR 534, 537; cited with approval in Oshlack v Richmond River Council (1998) 193 CLR 72, 86 at [34].
[9]Oshlack v Richmond River Council (1998) 193 CLR 72, 86 at [35].
[10]Norbis v Norbis (1986) 161 CLR 513, 537; Oshlack v Richmond River Council (1998) 193 CLR 72, 86 at [35].
Although costs are in the discretion of the Court, there is a settled practice (sometimes called a general rule) that in the absence of good reason to the contrary, a successful litigant should receive his or her costs.[11] It is not, however, a legal rule devised to control the exercise of the discretion.[12]
[11]Ritter v Godfrey [1920] 2 KB 47, 52; Donald Campbell and Co Ltd v Pollak [1927] AC 732, 809; Milne v Attorney-General for the State of Tasmania (1956) 95 CLR 460, 477.
[12]Oshlack v Richmond River Council (1998) 193 CLR 72, 86 at [35].
It is relevant to observe that the purpose of a costs order is to compensate the successful party for the costs incurred, and not to punish the unsuccessful party. That purpose is a guide to the exercise of the discretion.[13]
[13]Latoudis v Casey (1990) 170 CLR 534 at 563 per Toohey J, Mason CJ agreeing; McHugh J, 567; Ohn v Walton (1995) 36 NSWLR 77, 79.
Each of the parties make points of substance in favour of the orders for costs that they seek. It is of some significance, however, to reiterate the finding I made in my primary reasons that the defendant waited as long as possible before entering his conditional appearance to the writ and that this was a deliberate strategy. The defendant’s solicitor did not respond when on 25 February 2016 the plaintiff’s solicitor sent the email attaching the writ, statement of claim and summons for directions. Indeed there was no communication from the defendant’s solicitor until the reminder made by the plaintiff’s solicitor on 6 April 2016. In my view this is remarkable, and unreasonable, conduct. It is a significant matter in the assessment of who should bear the costs of the defendant’s application to set aside service of the writ and the plaintiff’s application to extend its validity for service.
It is true, as the plaintiff submits, that the ultimate issue was whether the plaintiff could continue with the proceeding. Along the way, however, there was the finding that the service of the writ without the SEPA notice had the result that the service was ineffective and this involved the successful application by the defendant to set aside the service. That, however, was the consequence of the defendant’s deliberate strategy. I therefore consider that the proper characterisation of the overall success is that the plaintiff has achieved its aim of being able to continue with the proceeding.
Against that conclusion, however, it is significant that:
(a) some of the direct evidence (the affidavit of Mr Lewin) bearing upon the success of the plaintiff’s application to extend the writ was served very late, and in contravention of the orders of Judd J made on 29 April 2016;
(b) the plaintiff resisted the defendant’s application to set aside service of the writ and did so at some length in its written and oral submissions; and
(c) it was the failure of the plaintiff or its solicitor (more likely the latter) to include the SEPA notice with the writ when served that is the ultimate source of both applications.
I allowed the plaintiff to rely upon the evidence in the late filed affidavits (the affidavits of Wilson and Lewin) in the interests of the just, efficient, timely and cost effective resolution of the applications. I expressed that in my reasons in that form.[14] By way of further explanation, it was particularly the just, timely and cost effective resolution of the applications. The alternative was likely to be an adjournment of the applications to allow a further opportunity for the defendant to consider and if necessary respond to the affidavits. It would have been unjust to refuse the plaintiff leave to rely on the affidavits. In truth, there was no identifiable prejudice to the defendant by the late filing of the affidavits save that he lost the opportunity to take advice and consider whether he should consent to the orders sought in the plaintiff’s application. The fact that there was a mistake by the plaintiff’s solicitor in failing to include the SEPA notice with the writ when served was so obvious as to go without saying. The direct evidence of that mistake in Mr Lewin’s was desirable, but not absolutely necessary. The evidence in the Lewin affidavit that was particularly relevant to the success of the application to extend the validity of the writ was the evidence of the circumstances giving rise to the delay in service of the writ between the date of issue in 2015 and the date of the first attempt at service referred to in the affidavit of Wilson.
[14]See paragraph [4] of the primary reasons at fn 5.
It is in relation to the costs incurred by the parties that it is appropriate to take into account the late filing of those affidavits and the contravention of the orders of Judd J that the late filing involves.
I consider the submissions of the defendant regarding the contempt involved in the late filing of the affidavits to be an overstatement. It is seems tolerably clear, as a matter of inference, that in the review of the applications made by the plaintiff’s solicitors and/or counsel in the lead up to the hearing that some deficiencies in the plaintiffs affidavit material were identified, and that is, in my view, the obvious explanation for the late filing of the affidavits, particularly the affidavit of Mr Lewin. I reject the submission of the defendant that the plaintiff deliberately and thus wilfully ignored the orders made by Judd J so as to obtain a forensic advantage. There is no proper basis in the evidence for that contention.
The defendant cannot have been unaware of the attempted service by Mr Wilson and his complaint regarding the late filing of that affidavit strikes me as hollow. The matters the subject of Mr Lewin’s affidavit are different, and involve material relevant to the decision I made to extend the validity of the writ.
I agree with the defendant that if account is not taken of the late filing of Mr Lewin’s affidavit the Court might be seen to be sanctioning a breach of the orders of Judd J. But I also agree with the plaintiff that its solicitor’s without prejudice letter by which it offered to resolve both applications without there being any orders as to costs is an important factor in favour of the orders that it seeks.
I also agree with the plaintiff’s submission that it is not appropriate to separate and differentiate the costs orders on each summons, for the reasons advanced by the plaintiff, and also because the affidavit material was relevant to both applications, as were the submissions and oral argument. It is thus very difficult to disentangle the costs of the separate applications.
The plaintiff points out that, in applications for the extension of the validity of a writ, the Court is granting the plaintiff an indulgence. This was a case where, if the application had been made ex parte, the Court might have required the attendance of the defendant so as to have a proper contradictor. Against these points, the plaintiff makes a valid response. The writ had been provided to the defendant’s solicitor in accordance with an agreed method of service and well within the period of validity of the writ for service. It was only the omission of the SEPA notice that made that service ineffective. There was no real prejudice to the defendant who sought, by a deliberate strategy, to exploit the technical deficiency. There is considerable force in the proposition advanced by the plaintiff that the costs involved on both sides have been unnecessarily incurred.
Taking all of these matters into account and balancing the competing factors, and applying an instinctive synthesis, the appropriate order as to costs is that each party bear its own costs of both applications.
Conclusion
There will be no order as to costs of –
(a) the defendant’s application to set aside the service of the writ;
(b) the plaintiff’s application to extend the validity of the writ for service.
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